Management Quality and Innovation in Emerging Countries

Abstract

I study the relationship between management quality and innovation input, and output of firms in ten emerging countries using data from the Management, Organization and Innovation (MOI) Survey. I find that management quality is tightly connected to the decisions of firms to invest in R&D. An improvement in management quality from the 25th percentile to the median is associated with a 3.3 percentage point increase in the propensity to invest in R&D. Furthermore, there are positive but weak association between management quality and product innovation. The empirical results for individual management practices show that the quality of incentive management is intimately connected to innovation performance. The quality of monitoring management is related to higher inputs into innovation, but not to innovation output. The quality of incentive management is related to higher input into innovation, but not to innovation output. All results hold after controlling for differences in management quality by industries. Additional analysis of management quality asymmetry shows that the results are driven mainly by firms with low quality management.